Moving Towards Gas Based Economy

Economic development of a nation is hugely determined by its energy needs and is directly proportional to its share in global energy consumption. In the present world energy scenario the market share of natural gas is quiet less as compared to coal and oil in the energy mix.

India is the third-largest energy consumer in the world after China and the United States. In 2016, the country consumed 724 million tons oil equivalent (Mtoe) of commercial energy. 1 India’s energy mix is dominated by coal and oil, which accounted for 57% and 30% respectively of total primary energy supply (TPES) in 2016. The share of natural gas was only 6.2%.

For developing a gas based economy, the market segmentation has been done in two ways:

Gas consumption at allocated government-controlled prices

It includes city gas distribution, fertilizer plants, and grid-connected power plants

It accounts for about three quarters of total gas demand.

This segment mainly relies on domestic gas production, complemented by LNG imports whose prices are subsidized by the government

Other industrial users and merchant power plants

This segment mainly relies on imported LNG

Gas-based power plants have a very low utilization rate because power generation from merchant power plants is often too expensive for the local state electricity distribution companies to purchase.

Gas mainly substitutes or complements oil products rather than coal. The industrial sector, including fertilizers, leads the growth. The role of gas in the power sector is limited to meeting peak demand and load balancing needs and the sector is not expected to drive a surge in gas demand

India’s natural gas supply and demand outlook is changing. The Government of India (GoI) wants to make India a gas-based economy ‘by boosting domestic production and buying cheap LNG’. India has set a target to raise the share of gas in its primary energy mix to 15% by 2022

Gas consumption in India is driven by five sectors: fertilizer (34% ), electric power (23%), refining (11%), city gas distribution, including transport (11%), and petrochemical (8%) industries. The country faces a widening gap between indigenous gas production and demand, which is met by increasing Liquefied Natural Gas (LNG) imports.

India’s move to promote gas usage is in line with the commitment made at the Paris meeting on climate change, which aims to reduce the country’s carbon emissions by up to 35% from 2005 levels by 2030 and producing 40% of the power from non-fossil fuel sources by 2030. Thus, natural gas is a good fit for decarbonizing India’s energy system, as it plays a dual role in both replacing carbon-intensive fuels and offer a trade-off with renewables.Gas based economy helps to reduce a country’s carbon emissions intensity

Challenges

Despite several initiatives taken towards being a gas-based economy, there are challenges, some of they are :

Affordability of gas in the key demand sectors, such as power and fertilizers

Consistent shortfall in supply of gas from domestic source could impact the competitiveness of domestic gas-based projects against coal-based power projects.

Import dependence is highly affected by world diplomacy and other external factors

Outlook for future gas demand

The industrial sector, including fertilizers, leads the growth.

Due to its environmental advantages and greater efficiency, gas is expected to play a larger role in the Indian energy mix.

Development of gas infrastructure is the most critical enabler for transition to a gas-based economy and pipeline and LNG infrastructure has to be created ‘ahead of the market

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